In this chapter, I will revisit some of the key theoretical debates on social classes within the field of development studies, particularly as it has been shaped in the context of Latin America. This examination will provide the theoretical basis to locate my own perspective, which sees development as a process of social change that is driven by the interactions and contentious relationships between classes, and between them and the state. It will also allow me to identify theoretically the elements that defined the context leading to the rise of the pink tide in Venezuelan and Ecuador, and the influence class struggles have played on the development model these governments attempted to put in place. The discussion will be critical in differentiating the relational approach to class I intend to pursue from other approaches more focused on the economic determinants of class. In my assessment, this latter perspective to the study of class has contributed to making class analysis, so important to the literature on development during the 1960s and 1970s, lose much of its theoretical appeal.
Strikingly, there is a largely shared inclination in development studies, whether promoting market solutions to generate industrialization, or adopting a critical perspective towards the capacity of the market to produce the most efficient economic outcomes, to presume that capitalists, provided with the appropriate conditions, are always making the right decisions to expand and sustain economic growth. Market apologists, be it from a classical or a
neoclassical perspective, are the most adamant on this issue, suggesting that an unfettered market will allow investors to make the right choices for the economy to thrive. Advocates of state-led development (from an institutionalists or an heterodox perspective) are generally more subtle:
given the specificity of market rationality, state interventions in markets are critical to channel investors towards a path of economic growth. If the policies are right, the assumption goes, private investment will produce a virtuous cycle of profit re-investment that will generate long-term growth. According to these perspectives, the absence of growth does not mean that investors were wrong, but rather that policies were incorrect. However, what if these explanations grant too much rationality to capitalist agents? What if the latter’s economic and political decisions could sometimes be damaging, even to their own interests?
In contrast to these favourable views of the contribution of capitalists—or the private sector, in common development jargon—more critical contributions to development studies (dependency theorists, Marxists, etc.), have questioned the very implications of capitalist economic growth for development. According to this view, capitalism relies on a specific form of exploitation that generates inequalities and the impoverishment of the masses, and it does so because capitalists are compelled to make decisions with a view to reaping growing profits from unpaid labour, and, very often, to send it to global centres, maintaining the peripheries in their dependent position.17 I want to push this argument further by thinking of capitalists not simply as individual investors, but rather as a class, capable of acting politically as such through organizations that press for their interest in a way that influence how development takes place. In short, their individual logic as capitalists is a factor in development, but not the only or even the
17 Foster-Carter (1973) argues, in a particularly compelling review of a large swath of Marxist and dependency authors on development (that he groups under the umbrella of “neo-marxist approaches”), that they articulated the concept of underdevelopment precisely to reject the idea that capitalism represents a positive evolution of the mode of production.
most relevant one. Their perceptions of their own short- and long-term interests, as shaped by their class organizations and the political pressure that they exert through them, are substantial factors influencing the overall configuration of the development models ultimately pursued.
I argue that one of the key shortcomings of most class-based approaches comes from the fact that rather than studying the actual positions adopted by capitalists through their organizations, they tend to deduce the political and economic positions of capitalists from an abstract economic interest, or class location. Fully including capitalists as a class—as a political agent built through organizations that make possible both a convergence among them in opposition to other classes and the adoption of common positions with regard to the state and its policies—is a critical and necessary step to understand the particular shape of a development model. My goal is not to define development and underdevelopment so as to propose a precise solution for stimulating economic growth, but rather to adopt an analytical perspective that grasps the class conflict underlying the shift from one development model to another, and to see how the interests of some are promoted over that of others.
The chapter is organized in five main sections. In the first section, I review structuralism, modernization, and dependency, which form the theoretical backdrop to Marxist debates on the nature of class in the transition to capitalism, a discussion that lies at the core of development studies. This leads to a consideration, in the second section, of the diverse ways in which class has been conceived in social theory. A third section reviews the shortcomings in approaches that overstretch the role of class. In the fourth section, I revisit more recent approaches to class that converge with the perspective presented here. A fifth section outlines more recent class perspectives from which I depart. The conclusion summarizes the findings and gives guidance on how it informs the way I undertake my analysis of Venezuela and Ecuador.
Development and the Making of Entrepreneurs
The theorization of class has been at the core of development studies since its birth in Latin America, although the original focus was essentially on the class of entrepreneurs. Moreover, growing attention to development as a field of inquiry was initially motivated by confidence in the capacity of the state to foster industrialization by supporting entrepreneurs. Trade restrictions during the Great Depression and later the Second World War generated unplanned industrialization in several Latin American countries by forcing the substitution of unavailable imports. Early Latin American development theories aimed to reproduce this initial unplanned industrialization, but this time through deliberate state action. Raúl Prebisch (1950), benefiting from the institutional space opened to him in the United Nations’ Economic Commission for Latin America (ECLA), was a pioneer in the field and adopted a structuralist approach.
However, despite important results, structuralist-inspired development policies faced serious challenges maintaining the class alliances needed for their proper functioning.
According to Prebisch, Latin American underdevelopment resulted from a dualism:
advanced productive technologies reached only the export sector, confined mostly to primary commodities, leaving behind a large pre-capitalist sector based on a subsistence economy. This situation was perpetuated by a historically-constructed international division of labour that confined Latin America to the role of exporter of primary products. As the terms of trade for such products declined comparatively to that of value-added/industrial products from core industrial countries, Latin American exports generated declining revenues, limiting the amount
that could be invested in improving the productive apparatus.18 Prebisch’s proposal for underdeveloped countries was to adopt inward-looking policies that, without delinking the economy from the world market, could improve technology in domestic production through the careful selection of importing and exporting sectors.19 A proper plan would create a new industrial sector ready to compete at the international level.
This understanding of the causes of and remedies to the lack of development granted the role of saviour to a specific kind of capitalist, the domestic entrepreneur, whose actions and rationality could pull the entire economy towards development when stimulated with the right incentives and protections from the state. They would bring along development by displacing the economic importance of landowners. Labour also had a role to play, as some of the advantages enjoyed by developed countries were understood as stemming from a higher rate of unionization.
Well-organized workers could secure better wages, creating a buffer that could protect internal markets during cycles of economic decline. Thus, Prebisch proposed an alliance between labour and domestic capital against the power of “foreign companies” and “absentee landowners.”
This approach presupposed that with the right incentives, a class of industrialists would accept the direction provided by the state and an alliance with labour to confront the landed class and multinational corporations. As we will see in the following chapters, although capitalist class
18 Since Hans Singer (1950) developed a similar thesis regarding the declining terms of trade for primary products from peripheries in the same period, the model is often referred to as Prebisch-Singer. Despite both Prebisch and Singer having worked within the United Nations, their similar models were developed independently from one another.
19 The idea of protecting infant industries was theorized in European political economy by German economist Frederich List (2005 [1841]), whose contribution was deeply influenced by his study of the United States' path to industrial development. Exiled in the US (from 1825 to 1832), List discovered the ideas of Alexander Hamilton and his approach to the development of an American industry (Selwyn 2014, chap. 2). He later elaborated a theory that stressed the need to protect, using Hamilton’s expression, an “infant industry” in order to support the development of a German industrial base despite the competitive advantage of the more advanced British economy.
organizations have adopted a variety of positions, they tended to be based on alliances between entrepreneurs, multinationals and/or landowners against the state and labour. The political tensions these alliances generated with the popular sector and the state tended to eventually undermine the consensus necessary to sustain a structuralist-inspired development path.
The original rebuttals to structuralism came from modernization theory, an approach that saw positive reasons for privileging multinational corporations over domestic capital, and cautioned against the dangers of labour mobilization and demands in early stages of development. According to modernization theorists like Walt Whitman Rostow (1956; 1971b;
1971a), the lack of capitalist development was the outcome of internal dynamics specific to each society and connected to values and practices that could be modified, in stages, to reach development. Similar to structuralism, the key development agent for modernization theory was the “new enterprising men” who slowly became part of a new “class of business-men” and
“industrial leaders” (Rostow 1956, 27–30), an elite that emerged from the institutional transformation often induced in reaction to an external shock or a political shift. Rostow’s approach promoted developing the kinds of institutions that would foster values in society that support the emergence of entrepreneurs. Multinational corporations, in his view, could contribute to this process.
Inspired by Max Weber (Weber 1992), whose theory associated capitalism with specific cultural features, Rostow’s approach contended that the absence of capitalist development was derived from the lack of appropriate “political and social structure and, even, ineffective cultural values” (1956, 27). The values of entrepreneurs, their enterprises, and the institutions that foster them in existing capitalist countries should serve as a model to be copied.
The role attributed to ‘business-men’ and industrial leaders in Rostow’s texts epitomizes the role of the elite for modernization theory. It stressed the need for an appropriate structure to breed and protect the small group of actors that could drive modernization by improving production. As Seymour Martin Lipset once said about Latin America, elite analysis was essential because “it is clear that regardless of differences in social systems, one of the requisites for development is a competent elite, motivated to modernize their (sic) society,” because “the structure of complex society and organization prevents the mass from directly exercising power”
(Lipset and Solari 1967, viii). From this perspective, the capacity of the masses to organize can only be detrimental to development. Thus, elite analysis stood in sharp opposition to contemporary class perspectives (Lipset and Solari 1967, vii).
Interestingly, for our cases, it is when elites in Venezuela and Ecuador acquired the role prescribed in Lipset’s approach, isolated and in control of key institutions, that they stimulated the kind of popular opposition and uprising that forced an institutional renewal. When, in the 1990s, elites took control over the state and actively pursued the exclusion of popular class organizations from participation in the policy-making process, their own development option became impossible to implement. From a class perspective, the problem with such an approach is its inability to properly include the balance of forces that makes development models work over the longer term.
Fernando Henrique Cardoso (1967), a leading figure of the dependency approach, rejected modernization’s narrow focus on industrial elites as modernizing agents. According to Cardoso, the investors’ success in development depended not only on their values, like Rostow suggested, but also on several other key factors that set the context for development. They included internal factors like state policies, the capacity of workers to organize, as well as
external elements like competing multinationals and the evolving organization of world production and trade.
Cardoso explicitly challenged modernization theory at the Montevideo conference on elites in Latin America convened by Lipset in 1967. Beginning with a critical statement that presaged post-development’s critique of Eurocentrism by three decades,20 Cardoso debunked modernization theory’s implication that entrepreneurs in Latin America should emulate the entrepreneurs of the early days of capitalism in Europe and the United States. The problem with the proposition, Cardoso argued, was that it did not take into account the striking historic and structural differences between 18th and 19th century Europe, and contemporary Latin America.
With different conditions, notably stronger international competition from social formations where capitalism had had several centuries to improve its functioning, Latin American entrepreneurs of the 1960s and 1970s could not simply emulate past European entrepreneurs.
From this critique of modernization, Cardoso, in collaboration with Enzo Faletto (Cardoso and Faletto 1979) during their association with ECLA, developed their rejection of modernization theory. First, as mentioned earlier, since conditions differ from one country to another (even more from one continent—Europe—to another—the Americas), and from one period to another, they rejected the claim that following a similar set of policies in different contexts would lead to industrialization. Most importantly, they rejected modernization’s
20 According to post-development approaches, development theories are Eurocentric because they are constructed around a model based on ‘northern’ or ‘western’ societies. Underdeveloped societies are then discursively produced as imperfect, retarded (Escobar 1995). It is interesting to note that Escobar, instead of recognizing the origin of dependency theories—mostly developed in Latin America by Latin American authors—prefers to lump all dependency theories in the same discursive space as classical development economics and tag them as Eurocentric. In a perplexing turn of events, Eurocentrism will eventually become Andre Gunder Frank's main field of interest, and the topic of what he considered to be his “best book” (Frank 1998; Kay 2011).
Frank was the main European figure of a stream of literature otherwise dominated by authors from the global south.
assertion that entrepreneurs, given the proper institutional context, were necessarily capable of producing the conditions to sustain a virtuous cycle of growth. In a context where the “elite”
drew important advantages from its collaboration with multinational corporations, they could very well behave in ways that contradict the expectations of modernization theory while still holding values linked to capitalism.21 Indeed, as their profit was derived from their collaboration with multinational corporations, they could privilege this international partnership over the development of autonomous domestic industries. This assessment led them to be skeptical of the virtues of the entrepreneurialism of domestic bourgeoisies, mostly because the economic and technological ties to foreign capital changes investors’ interests.22 However, Cardoso and Faletto stressed that the conditions resulting from the ties to multinational capital also depended on the relationship that domestic entrepreneurs maintained with workers, with the middle class, and with the state. They could therefore hardly be treated in isolation from the influence of other social forces and classes. It was, therefore, with this critique of modernization that a more encompassing class approach to Latin American development took place.
21 In a luminous study on Brazilian elites and their role in industrialization, Peter Evans (Evans 1979, 10) shows how the development of local capital was strongly associated with the growing importance of multinational capital in a context where their “conflicts of interest are now more subtle.” He goes even further to argue that the partnership between national and multinational capitals is completed by the state, sealing a triple alliance that is instrumental for the development of a semi-periphery. Although I draw insights from Evans’ work, I depart from his approach because he voluntarily leaves aside, for good reasons in his case, the importance of the masses and the popular sector in influencing industrial development. In the case studies of this dissertation, the popular sector is essential to explaining the transition towards the pink tide, and its capacity to stay in power.
22 This critique is common to many Marxists of the 1960s and 1970s who, against several communist parties, were skeptical about the possibility of national capitalist development led by a domestic bourgeoisie (Foster-Carter 1973, 22, 28).
Class and the State in Dependency Theory Debates
The more encompassing class approach to development in Latin America of Cardoso and Faletto represented, as well, an attempt to overcome some of the weaknesses in the structuralist approach: being first an economic approach, structuralism lacked a proper state theory and did not fully appreciate the importance of class agency (Kay 1989, 134). Including classes and social forces in their analysis led Cardoso and Faletto to force a wedge between a nationally-based bourgeoisie, often linked with domestic “middle classes” attached to their place of origin, and representatives of multinational interests, whose accumulation strategies were linked to the centres.
This differentiation within the ‘elite’ elaborated and expanded on one of the central features of structuralism: the necessity to differentiate the dynamic of capitalist accumulation in the centre and the peripheries. However, whereas structuralism emphasized the dualism that differentiated the dynamic of capitalist development in the centres from a mix of capitalism and pre-capitalist production in peripheral areas, Cardoso and Faletto identified the dynamic in both centres and peripheries as being capitalist. Given a similar definition of capitalism with structuralists—a constant reinvestment of capital that leads to constant improvement of the means of production (Cardoso and Faletto 1979, xx)—the general dynamic unfolding at a world scale is a constant technological improvement, which requires capital goods as well as financial capacities, and “not all capitalist economies have these capabilities. Some of them have to find on a world scale the necessary complementarity to continue their march towards economic growth” (Cardoso and Faletto 1979, xxi). The general capitalistic drive imposed its rules (structure), but some places cannot turn them into a virtuous cycle without the support of other
economies. Thus, dependent capitalist economies tend to specialize in raw material production, while developed capitalist countries are driven by industrial and advanced production.
From this assessment, Cardoso and Faletto opened up a discussion about the kinds of class alliances that were potentially conducive to successful capitalist development, and those
From this assessment, Cardoso and Faletto opened up a discussion about the kinds of class alliances that were potentially conducive to successful capitalist development, and those